Industrial purposes in pylon compensation agreement included warehousing

Public utilities have compulsory purchase powers and can insist on acquiring rights they require, but usually prefer to proceed by negotiation and agreement.

On occasion the deed of easement may contain a clause to ensure that if a development opportunity emerges in future, the Grantor or his successors will be entitled to compensation for any reduction in value due to the existence of the pipes or wires.

There may be advantages to both parties in this:

– the Grantor won’t have to accept a speculative assessment as to the reduction in the value of his land at some unknown point in the future for a use which can only be guessed at and could easily be underestimated; and,

– at the time of the easement being granted, the Utility would not be required to make a payment to compensate for a loss which may never happen.

In the Upper Tribunal (Lands Chamber) case of G Park Skelmersdale Ltd v Electricity North West Ltd [2014] G Park Skelmersdale Limited (“the claimant”) sought compensation from Electricity North West Limited (“the respondent”), under a deed of grant (“Deed”) dated 12 May 1967 made between the Central Electricity Generating Board (“CEGB”) and Mr William Holland, (“the Grantor”) who owned Spa Farm, Lathom, Skelmersdale, Lancashire (“the Property”) prior to the claimant.

This said that if the Grantor obtained planning permission for the Property “for residential or industrial purposes” the Grantor could give CEGB 6 months’ notice to pay the Grantor compensation for any diminution in the value of the areas benefited by the planning permission due to the presence of the electric lines above the Property.

The writer was brought up in Lathom within sight of the pylons and remembers their first appearance on the skyline. Indeed the House depicted above is nearby Lathom House, designed by Giocomo Leoni in 1714 for East India Company Director Sir Thomas Bootle, and mainly demolished in 1925.

On 26 March 2008 the claimant gave the respondent notice of planning permission for warehousing and distribution and claimed compensation under clause 3(1) of the Easement.

The parties agreed to postpone the 6 month deadline to pay to allow for consideration of the feasibility of diverting the overhead line to allow the development to proceed but that did not happen.

The two preliminary issues the Tribunal had to decide were:

1. Whether the references to “development … for … industrial purposes” and “such purposes” in clause 3(1) of the Easement included development for primary storage/distribution uses under Class B8 of the Use Classes Order 1987; and

2. Whether the appropriate valuation date for the assessing compensation was the date of:

2.1 the grant of outline planning permission (20 December 2001); or

2.2 the variation of that planning permission (9 September 2004), or

2.3 the approval of reserved matters (15 May 2007), or

2.4 the notice of claim (26 March 2008).

The respondent said clause 3(1) was to restrict compensation to cases where the development prevented was a residential or industrial use. However:

– the Tribunal could think of no reason why CEGB would reasonably expect to pay compensation if the presence of its overhead lines restricted one valuable use of the land, but NOT if another use was restricted; nor

– could it think why the ability to develop the land for certain uses should be restricted without the Grantor having any compensation for the reduction in value due his inability to pursue those uses. Such an uncommercial arrangement was not likely to have been the parties’ intention.

the Tribunal found:

– on the first preliminary issue that the expression “industrial purposes” was not to be narrowly construed, and was wide enough to include the development of the Property for storage and distribution uses within Class B8.

Against the context of the Property’s then agricultural use, the use of the composite expression “residential or industrial purposes” suggested that what was intended “was a broad classification of alternative uses “representing the principal classes of profitable development”, rather than a narrow focus on manufacturing industry.”

Also development for “industrial purposes” had a wider connotation than “development for industry”, and would include ancillary uses. Land used for the storage of raw materials or components for use in manufacturing, or of manufactured goods awaiting distribution to customers, was used for “industrial purposes”.

On the second issue of the valuation date, the relevant planning permission was the outline planning permission obtained in 2001, renewed and then supplemented by the reserved matters approval obtained on appeal on 15 May 2007.

The parties must have intended that the relevant permission would include the details necessary to enable the property to be developed. The test was at what date did the development get the planning permission that could not be implemented because of the electric lines over the property? That date was 15 May 2007 when the final reserved matters approval was obtained. It was only at that date that development could have proceeded.

So the valuation date under clause 3(1) was 15 May 2007.

This blog has been posted out of general interest. It does not remove the need to get bespoke legal advice in individual cases.